Exhibit 10(47)
COMMON STOCK AND WARRANTS PURCHASE AGREEMENT
Dated as of March 31, 2000
among
VIRTUAL COMMUNITIES, INC.
and
THE PURCHASERS LISTED ON EXHIBIT A
TABLE OF CONTENTS
Page
ARTICLE I Purchase and Sale of Stock 225
ARTICLE II Representations and Warranties 226
Section 2.1 Representations and Warranties of the Company 226
Section 2.2 Representations and Warranties of the Purchasers
ARTICLE III Covenants 243
Section 3.1 Securities Compliance. 243
Section 3.2 Registration and Listing 244
Section 3.3 Inspection Rights 244
Section 3.4 Compliance with Laws 244
Section 3.5 Keeping of Records and Books of Account 245
Section 3.6 Reporting Requirements 245
Section 3.7 Amendments 245
Section 3.8 Other Agreements 245
Section 3.9 Distributions 245
Section 3.10 Intentionally Omitted. 245
Section 3.11 Intentionally Omitted. 245
Section 3.12 Intentionally Omitted. 246
Section 3.13 Subsequent Financing 246
Section 3.14 Reservation of Shares 246
Section 3.15 Transfer Agent Instructions 246
ARTICLE IV Conditions 247
Section 4.1 Conditions Precedent to the Obligation of the Company
to Sell the Shares at Closing 247
Section 4.2 Conditions Precedent to the Obligation of the Purchasers
to Purchase the Shares at the Closing 248
ARTICLE V Registration Rights 251
ARTICLE VI Stock Certificate Legend 251
Section 6.1 Legend 251
ARTICLE VII Termination 252
Section 7.1 Termination by Mutual Consent 252
Section 7.2 Other Termination 252
Section 7.3 Termination of Closing 252
Section 7.4 Effect of Termination 252
ARTICLE VIII Indemnification 253
Section 8.1 General Indemnity 253
Section 8.2 Indemnification Procedure 253
ARTICLE IX Miscellaneous 254
Section 9.1 Fees and Expenses 254
Section 9.2 Specific Enforcement, Consent to Jurisdiction. 254
Section 9.3 Entire Agreement; Amendment 255
Section 9.4 Notices 256
Section 9.5 Waivers 257
Section 9.6 Headings 257
Section 9.7 Successors and Assigns 257
Section 9.8 No Third Party Beneficiaries 257
Section 9.9 Governing Law 257
Section 9.10 Survival 257
Section 9.11 Counterparts 257
Section 9.12 Publicity 257
Section 9.13 Severability 257
Section 9.14 Further Assurances 258
COMMON STOCK AND WARRANTS PURCHASE AGREEMENT
This COMMON STOCK AND WARRANTS PURCHASE AGREEMENT (the "Agreement") is
dated as of March 31, 2000, by and among Virtual Communities, Inc., a
corporation organized under the laws of the State of Delaware (the "Company")
(NASDAQ: "VCIX"), and each of the Purchasers whose names are set forth on
Exhibit A hereto (individually, a "Purchaser" and collectively, the
"Purchasers").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Purchasers
and the Purchasers shall purchase up to $3,000,000 of the Company's common
stock, .$01 par value per share (the "Common Stock"), and warrants to purchase
shares of Common Stock (singularly a "Warrant" and collectively, the
"Warrants"), in substantially the form attached hereto as Exhibit B; and;
WHEREAS, such purchase and sale will be made in reliance upon the
provisions of Section 4(2) and Rule 901 of Regulation S ("Regulation S") of the
United States Securities Act of 1933 as amended, and regulations promulgated
thereunder (the "Securities Act"), or upon such other exemption from the
registration requirements of the Securities Act as may be available with respect
to any or all of the purchases of Common Stock and Warrants to be made
hereunder.
The parties hereto agree as follows:
Purchase and Sale of Stock
QQQQ. Purchase and Sale of Common Shares. Upon the following terms and
subject to the conditions contained herein, the Company shall issue
and sell to the Purchasers and each of the Purchasers, severally and
not jointly shall purchase from the Company 517,800 shares of Common
Stock (the "Common Shares"), at a price per share equal to $5.79375.
The aggregate price of the Common Shares shall be $3,000,000.
RRRR. The Shares. The Company has authorized and has reserved and
covenants to continue to reserve, free of preemptive rights and
other similar contractual rights of stockholders, a sufficient
number of its authorized but unissued shares of its Common Stock, to
effect the issuance of the Common Shares and exercise of the
Warrants. Any shares of Common Stock issuable upon exercise of the
Warrants (and such shares when issued) are herein referred to as the
"Warrant Shares". The Common Shares and the Warrant Shares are
sometimes collectively referred to as the "Shares".
SSSS. Purchase Prices, Execution and Closing. In consideration of and in
express reliance upon the representations, warranties, covenants,
terms and conditions of this Agreement, the Company agrees to issue
and sell to the Purchasers and the Purchasers, severally but not
jointly, agree to purchase the Common Shares
and Warrants exercisable for that number of Warrant Shares set forth
opposite their respective names on Exhibit A. The aggregate purchase price
of the Common Shares and the Warrants being acquired by each Purchaser is
set forth opposite such Purchaser's name on Exhibit A (for each such
Purchasers, a "Purchase Price", and collectively referred to as the
"Purchase Prices"). The closing of the purchase and sale of the Common
Shares and Warrants (the "Closing") to be acquired by the Purchasers from
the Company shall take place at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP, The
Chrysler Building, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ at 10:00
a.m. E.S.T. on (i) the date on which the last to be fulfilled or waived of
the conditions set forth in Article IV hereof and applicable to the
Closing shall be fulfilled or waived in accordance herewith or (ii) such
other time and place or on such date as the Purchasers and the Company may
agree upon (the " Closing Date").
Escrow. On or before the Closing Date, (a) the Company shall execute and deliver
to the escrow agent (the "Escrow Agent") identified in the Escrow Agreement
attached hereto as Exhibit C (the "Escrow Agreement") all applicable
agreements, documents, instruments and writings required pursuant to
Section 4.2 herein (collectively, the "Closing Documents"), to be delivered
by the Company including, without limitation, certificates for the number
of Common Shares set forth opposite each Purchaser's name on Exhibit A, as
applicable, registered in such Purchaser's name and such Purchaser's
Warrants and (b) each of the Purchasers shall pay by wire transfer of
immediately available funds into escrow in accordance with the Escrow
Agreement such Purchaser's Purchase Price, as applicable, and execute and
deliver all applicable agreements, documents, instruments and writings
required pursuant to Section 4.1, to be delivered by such Purchaser. In
regard to the Closing, the Escrow Agent shall give notice (by telephone or
other means) (an "Escrow Agent Notice") to the parties hereto when the
Escrow Agent has received all of the Closing Documents and wire transfer
the funds constituting the Purchase Prices and deliver the other Closing
Documents to the Company pursuant to the terms of the Escrow Agreement. As
soon thereafter as is practicable on the Closing Date, the Escrow Agent
shall deliver the Company's Closing Documents to the Purchasers, including
applicable certificates for the Common Shares and the Warrants.
TTTT. Warrants. The Warrants shall be divided into separate Warrants and
shall be designated "A" Warrant and "B" Warrant. The initial
aggregate number of shares of Common Stock issuable upon exercise of
the A Warrants and B Warrants shall be equal to 129,450 and 500,000,
respectively. Each of the A Warrants shall be exercisable for three
(3) years from the Closing Date and each of the B Warrants shall be
exercisable until four (4) months from the Effectiveness Date (as
defined in Section 3.2 hereof).
Representations and Warranties
UUUU. Representations and Warranties of the Company. In order to induce
the Purchasers to enter into this Agreement and to purchase the
Shares, the Company hereby, makes the following representations and
warranties to the Purchasers,
except as set forth in the Company's disclosure schedule delivered
with this Agreement:
1. Organization, Good Standing and Power. The Company is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and has the
requisite corporate power to own, lease and operate its
properties and assets and to conduct its business as it is now
being conducted and to enter into this Agreement and to
perform its obligations hereunder. The Company does not have
any subsidiaries or own securities of any kind in any other
entity, except as set forth in Schedule 2.1(g) hereto. The
Company and each subsidiary is duly qualified as a foreign
corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary except
for any jurisdiction(s) (alone or in the aggregate) in which
the failure to be so qualified will not have a Material
Adverse Effect (as defined hereinafter) on the Company's
financial condition. For the purposes of this Agreement,
"Material Adverse Effect" means any adverse effect on the
business, operations, properties, prospects, assets or
financial condition of the Company or its subsidiaries and
which is material to such entity or other entities controlling
or controlled by such entity or which is likely to materially
hinder the performance by the Company of its obligation
hereunder and under the other Transaction Documents (as
defined in Section 2.1(b) hereof).
2. Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and perform this
Agreement, the Escrow Agreement, the Registration Rights
Agreement attached hereto as Exhibit D (the "Registration
Rights Agreement"), the Transfer Agent Instructions (as
defined in Section 3.14 hereof) and the Warrants
(collectively, the "Transaction Documents") and to issue and
sell the Shares in accordance with the terms hereof and the
Warrants. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by
it of the transactions contemplated hereby and thereby have
been duly and validly authorized by all necessary corporate
action, and no further consent or authorization of the Company
or its Board of Directors or stockholders is required. This
Agreement has been duly executed and delivered by the Company.
The Registration Rights Agreement will have been duly executed
and delivered by the Company on or before the Closing Date.
Each of the Transaction Documents constitutes, or shall
constitute when executed and delivered, a valid and binding
obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may
be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditor's rights and
remedies or by other equitable principles of general
application.
3. Capitalization. The authorized capital stock of the Company
and the shares thereof currently issued and outstanding as of
March 31, 2000 are set forth on Schedule 2.1(c) hereto. All of
the outstanding shares of the Company's Common Stock and any
other security of the Company have been duly and validly
authorized. Except as set forth in this Agreement and the
Registration Rights Agreement and as set forth on Schedule
2.1(c) hereto, no shares of Common Stock or any other
securities issued by the Company are entitled to preemptive
rights or registration rights and there are no outstanding
options, warrants, scrip, rights to subscribe to, call or
commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital
stock of the Company. Furthermore, except as set forth in this
Agreement and the Registration Rights Agreement and as set
forth on Schedule 2.1(c), there are no contracts, commitments,
understandings, or arrangements by which the Company is or may
become bound to issue additional shares of the capital stock
of the Company or options, securities or rights convertible
into shares of capital stock of the Company. Except for
customary transfer restrictions contained in agreements
entered into by the Company in order to sell restricted
securities or as provided on Schedule 2.1 (c) hereto, the
Company is not a party to or bound by any agreement or
understanding granting registration or anti-dilution rights to
any person with respect to any of its equity or debt
securities. The Company is not a party to, and it has no
knowledge of, any agreement or understanding restricting the
voting or transfer of any shares of the capital stock of the
Company. Except as set forth on Schedule 2.1(c) hereto, the
offer and sale of all capital stock, convertible securities,
rights, warrants, or options of the Company issued prior to
the Closing complied with all applicable federal and state
securities laws, and no holder of such securities has a right
of rescission or claim for damages with respect thereto which
could have a Material Adverse Effect. The Company has
furnished or made available to the Purchasers true and correct
copies of the Company's Articles of Incorporation as in effect
on the date hereof (the "Articles"), and the Company's Bylaws
as in effect on the date hereof (the "Bylaws").
4. Issuance of Shares. The Common Shares to be issued at the
Closing have been duly authorized by all necessary corporate
action and, when paid for or issued in accordance with the
terms hereof, the Common Shares shall be validly issued and
outstanding, fully paid
and nonassessable and entitled to all applicable rights and
preferences set forth in the Articles. When the Warrant Shares
are issued in accordance with the terms of this Agreement and
as set forth in the Warrants, such shares will be duly
authorized by all necessary corporate action and validly
issued and outstanding, fully paid and non-assessable, and the
holders shall be entitled to all rights accorded to a holder
of Common Stock.
5. No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by
the Company of the transactions contemplated herein and
therein do not and will not (i) violate any provision of the
Company's Articles or Bylaws, (ii) conflict with, or
constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or
cancellation of, any agreement, mortgage, deed of trust,
indenture, note, bond, license, lease agreement, instrument or
obligation to which the Company is a party or by which any of
its respective properties or assets are bound, (iii) create or
impose a lien, mortgage, security interest, charge or
encumbrance of any nature whatsoever on any property of the
Company under any agreement or any commitment to which the
Company is a party or by which the Company is bound or by
which any of its respective properties or assets are bound, or
(iv) result in a violation of any federal, state, local or
foreign statute, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations)
applicable to the Company or any of its subsidiaries or by
which any property or asset of the Company or any of its
subsidiaries are bound or affected, except, in all cases other
than violations pursuant to clause (i) above, for such
conflicts, defaults, terminations, amendments, acceleration,
cancellations and violations as would not, individually or in
the aggregate, have a Material Adverse Effect. The business of
the Company and its subsidiaries is not being conducted in
violation of any laws, ordinances or regulations of any
governmental entity, except for possible violations which
singularly or in the aggregate do not and will not have a
Material Adverse Effect. The Company is not required under
federal, state or local law, rule or regulation to obtain any
consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order
for it to execute, deliver or perform any of its obligations
under the Transaction Documents, or issue and sell the Common
Shares and the Warrant Shares in accordance with the terms
hereof or thereof (other than any filings which may be
required to be made by the Company with the Commission or
state securities administrators subsequent to a Closing, and
any registration statement which may be filed pursuant
hereto); provided that, for purposes of the representation
made in this
sentence, the Company is assuming and relying upon the
accuracy of the relevant representations and agreements of the
Purchasers herein.
6. Commission Documents, Financial Statements. The Company has
provided to the Purchasers prior to the date hereof copies of
its annual report on Form 10-KSB for the fiscal year ended
December 31, 1998, its quarterly reports for the fiscal
quarters ended March 31, 1999, June 30, 1999, September 30,
1999 and its Form SB-2, as amended (the "Form SB-2), filed
January 14, 2000 (all such documents are collectively referred
to herein as the "SEC Documents"). The Company has not
provided to the Purchasers any material non-public information
or other information which, according to applicable law, rule
or regulation, should have been disclosed publicly by the
Company but which has not been so disclosed, other than with
respect to the transactions contemplated by this Agreement.
The financial statements of the Company furnished to the
Purchasers comply as to form in all material respects with
applicable accounting requirements and the published rules and
regulations of the Commission or other applicable rules and
regulations with respect thereto. Such financial statements
have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis
during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto or
(ii) in the case of unaudited interim statements, to the
extent they may not include footnotes or may be condensed or
summary statements), and fairly present in all material
respects the financial position of the Company and its
subsidiaries as of the dates thereof and the results of
operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit
adjustments).
7. Subsidiaries. Schedule 2.1(g) hereto sets forth each
subsidiary of the Company showing the jurisdiction of its
incorporation or organization and showing the percentage of
the Company's ownership of the outstanding stock or other
interests of such subsidiary. For the purposes of this
Agreement, "subsidiary" shall mean any corporation or other
entity of which at least a majority of the securities or other
ownership interest having ordinary voting power (absolutely or
contingently) for the election of directors or other persons
performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other
subsidiaries. All of the outstanding shares of capital stock
of each subsidiary have been duly authorized and validly
issued, and are fully paid and non-assessable. Except as
disclosed on Schedule 2.1(g) there are no outstanding
preemptive, conversion or other rights, options, warrants or
agreements granted or issued by or binding upon any subsidiary
for the purchase or
acquisition of any shares of capital stock of any subsidiary
or any other securities convertible into, exchangeable for or
evidencing the rights to subscribe for any shares of such
capital stock. Neither the Company nor any subsidiary is
subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of the
capital stock of any subsidiary or any convertible securities,
rights, warrants or options of the type described in the
preceding sentence. Neither the Company nor any subsidiary is
party to, nor has any knowledge of, any agreement restricting
the voting or transfer of any shares of the capital stock of
any subsidiary.
8. No Material Adverse Change. Since September 30, 1999, the date
through which the most recent report of the Company has been
prepared and filed with the Commission (a copy of which is
included in the Commission Documents) the Company has not
experienced or suffered any Material Adverse Effect, except as
disclosed on Schedule 2.1(h) hereto.
9. No Undisclosed Liabilities. Except as disclosed on Schedule
2.1(i) hereto, neither the Company nor any of its subsidiaries
has any liabilities, obligations, claims or losses (whether
liquidated or unliquidated, secured or unsecured, absolute,
accrued, contingent or otherwise) other than those incurred in
the ordinary course of the Company's or its subsidiaries
respective businesses since September 30, 1999, and which,
individually or in the aggregate, do not or would not have a
Material Adverse Effect.
10. No Undisclosed Events or Circumstances. No event or
circumstance has occurred or exists with respect to the
Company or its subsidiaries or their respective businesses,
properties, prospects, operations or financial condition,
which, under applicable law, rule or regulation, requires
public disclosure or announcement by the Company but which has
not been so publicly announced or disclosed.
11. Indebtedness. Schedule 2.1(k) hereto sets forth as of the date
hereof all outstanding secured and unsecured Indebtedness of
the Company or any subsidiary, or for which the Company or any
subsidiary has commitments. For the purposes of this
Agreement, "Indebtedness" shall mean (a) any liabilities for
borrowed money or amounts owed in excess of $25,000 (other
than trade accounts payable incurred in the ordinary course of
business), (b) all guaranties, endorsements and other
contingent obligations in respect of Indebtedness of others,
whether or not the same are or should be reflected in the
Company's balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary
course of business; and (c) the present
value of any lease payments in excess of $25,000 due under
leases required to be capitalized in accordance with GAAP.
Except as disclosed on Schedule 2.1(k), neither the Company
nor any subsidiary is in default with respect to any
Indebtedness.
12. Title to Assets. Each of the Company and its subsidiaries has
good and marketable title to all of its real and personal
property, free of any mortgages, pledges, charges, liens,
security interests or other encumbrances, except for those
indicated on Schedule 2.1(l) hereto or such that, individually
or in the aggregate, do not cause a Material Adverse Effect on
the Company's financial condition or operating results. Except
as described on Schedule 2.1(l), all said leases of the
Company and each of its subsidiaries are valid and subsisting
and in full force and effect.
13. Actions Pending. There is no action, suit, claim,
investigation or proceeding pending or, to the knowledge of
the Company, threatened against the Company or any subsidiary
which questions the validity of this Agreement or the
transactions contemplated hereby or any action taken or to be
taken pursuant hereto or thereto. There is no action, suit,
claim, investigation or proceeding pending or, to the
knowledge of the Company, threatened, against or involving the
Company, any subsidiary or any of their respective properties
or assets, except as set forth on Schedule 2.1(m) hereto.
There are no outstanding orders, judgments, injunctions,
awards or decrees of any court, arbitrator or governmental or
regulatory body against the Company or any subsidiary or any
officers or directors of the Company or subsidiary in their
capacities as such.
14. Compliance with Law. The business of the Company and the
subsidiaries has been and is presently being conducted in
accordance with all applicable federal, state and local
governmental laws, rules, regulations and ordinances, except
as set forth on Schedule 2.1(n) hereto or such that,
individually or in the aggregate, the noncompliance therewith
would not have a Material Adverse Effect. The Company and each
of its subsidiaries have all franchises, permits, licenses,
consents and other governmental or regulatory authorizations
and approvals necessary for the conduct of its business as now
being conducted by it unless the failure to possess such
franchises, permits, licenses, consents and other governmental
or regulatory authorizations and approvals, individually or in
the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
15. Taxes. Except as set forth on Schedule 2.1(o) hereto, the
Company and each of the subsidiaries has accurately prepared
and filed all
federal, state and other tax returns required by law to be
filed by it, has paid or made provisions for the payment of
all taxes shown to be due and all additional assessments, and
adequate provisions have been and are reflected in the
financial statements of the Company and the subsidiaries for
all current taxes and other charges to which the Company or
any subsidiary is subject and which are not currently due and
payable. Except as disclosed on Schedule 2.1(o) hereto, none
of the federal income tax returns of the Company or any
subsidiary have been audited by the Internal Revenue Service.
The Company has no knowledge of any additional assessments,
adjustments or contingent tax liability (whether federal or
state) of any nature whatsoever, whether pending or threatened
against the Company or any subsidiary for any period, nor of
any basis for any such assessment, adjustment or contingency.
16. Certain Fees. The Company has not employed any broker or
finder or incurred any liability for any brokerage or
investment banking fees, commissions, finders' or structuring
fees, financial advisory fees or other similar fees in
connection with the Transaction Documents, except as set forth
on Schedule 2.1(p) hereto. All those entities listed on
Schedule 2.1(p) hereto are broker/dealers (i) registered and
in good standing with the National Association of Securities
Dealers, Inc. and (ii) registered pursuant to Section 15 of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
17. Disclosure. To the best of the Company's knowledge, neither
this Agreement or the Schedules hereto nor any other
documents, certificates or instruments furnished to the
Purchasers by or on behalf of the Company or any subsidiary in
connection with the transactions contemplated by this
Agreement or any of the other Transaction Document contain or
will contain any untrue statement of a material fact or omit
to state a material fact necessary in order to make the
statements made herein or therein, in the light of the
circumstances under which they were made herein or therein,
not misleading.
18. Operation of Business. The Company and each of the
subsidiaries owns or possesses all patents, trademarks, domain
names (whether or not registered) and any patentable
improvements or copyrightable derivative works thereof,
websites and intellectual property rights relating thereto,
service marks, trade names, copyrights, licenses and
authorizations, including (but not limited to) those set forth
on Schedule 2.1(r) hereto, and all rights with respect to the
foregoing, which are necessary for the conduct of its business
as now conducted without any conflict with the rights of
others except as disclosed on Schedule 2.1(r).
19. Environmental Compliance. Except as disclosed on Schedule
2.1(s) hereto, the Company and each of its subsidiaries have
obtained all material approvals, authorization, certificates,
consents, licenses, orders and permits or other similar
authorizations of all governmental authorities, or from any
other person, that are required under any Environmental Laws.
Schedule 2.1(s) hereto sets forth all material permits,
licenses and other authorizations issued under any
Environmental Laws to the Company or its subsidiaries.
"Environmental Laws" shall mean all applicable laws relating
to the protection of the environment including, without
limitation, all requirements pertaining to reporting,
licensing, permitting, controlling, investigating or
remediating emissions, discharges, releases or threatened
releases of hazardous substances, chemical substances,
pollutants, contaminants or toxic substances, materials or
wastes, whether solid, liquid or gaseous in nature, into the
air, surface water, groundwater or land, or relating to the
manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or
toxic substances, material or wastes, whether solid, liquid or
gaseous in nature. Except as set forth on Schedule 2.1(s)
hereto, the Company has all necessary governmental approvals
required under all Environmental Laws and used in its business
or in the business of any of its subsidiaries. The Company and
each of its subsidiaries are also in compliance with all other
limitations, restrictions, conditions, standards,
requirements, schedules and timetables required or imposed
under all Environmental Laws. Except for such instances as
would not individually or in the aggregate have a Material
Adverse Effect, there are no past or present events,
conditions, circumstances, incidents, actions or omissions
relating to or in any way affecting the Company or its
subsidiaries that violate or may violate any Environmental Law
after any of the Closings or that may give rise to any
environmental liability, or otherwise form the basis of any
claim, action, demand, suit, proceeding, hearing, study or
investigation (i) under any Environmental Law, or (ii) based
on or related to the manufacture, processing, distribution,
use, treatment, storage (including without limitation
underground storage tanks), disposal, transport or handling,
or the emission, discharge, release or threatened release of
any hazardous substance. "Environmental Liabilities" means all
liabilities of a person (whether such liabilities are owed by
such person to governmental authorities, third parties or
otherwise) whether currently in existence or arising hereafter
which arise under or relate to any Environmental Law.
20. Books and Record Internal Accounting Controls. The records and
documents of the Company and its subsidiaries accurately
reflect in
all material respects the information relating to the business
of the Company and the subsidiaries, the location and
collection of their assets, and the nature of all transactions
giving rise to the obligations or accounts receivable of the
Company or any subsidiary. The Company and each of its
subsidiaries maintain a system of internal accounting controls
sufficient, in the judgment of the Company's board of
directors, to provide reasonable assurance that (i)
transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting
principles and to maintain asset accountability, (iii) access
to assets is permitted only in accordance with management's
general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets
at reasonable intervals and appropriate actions is taken with
respect to any differences.
21. Material Agreements. Except as set forth in the Commission
Documents or on Schedule 2.1(u) hereto, neither the Company
nor any subsidiary is a party to any written or oral contract,
instrument, agreement, commitment, obligation, plan or
arrangement, a copy of which would be required to be filed
with the Commission as an exhibit to a registration statement
on Form S-1 or applicable form (collectively, "Material
Agreements") if the Company or any subsidiary were registering
securities under the Securities Act. Except as set forth on
Schedule 2.1(u) hereto, the Company and each of its
subsidiaries has in all material respects performed all the
obligations required to be performed by them to date under the
foregoing agreements, have received no notice of default and,
to the best of the Company's knowledge are not in default
under any Material Agreement now in effect, the result of
which could cause a Material Adverse Effect. No written or
oral contract, instrument, agreement, commitment, obligation,
plan or arrangement of the Company or of any subsidiary limits
or shall limit the payment of dividends on the Company's
Common Stock.
22. Transactions with Affiliates. Except as set forth on Schedule
2.1(v) hereto, there are no loans, leases, agreements,
contracts, royalty agreements, management contracts or
arrangements or other continuing transactions exceeding
$100,000 between (a) the Company, any subsidiary or any of
their respective customers or suppliers on the one hand, and
(b) on the other hand, any officer, employee, consultant or
director of the Company, or any of its subsidiaries, or any
person owning any capital stock of the Company or any
subsidiary or any member of the immediate family of such
officer, employee, consultant, director or stockholder or any
corporation or other entity controlled
by such officer, employee, consultant, director or
stockholder, or a member of the immediate family of such
officer, employee, consultant, director or stockholder.
23. Securities Act of 1933. The Company has complied and will
comply with all applicable federal and state securities laws
in connection with the offer, issuance and sale of the Common
Shares and the Warrants hereunder. Neither the Company nor
anyone acting on its behalf, directly or indirectly, has or
will sell, offer to sell or solicit offers to buy any of the
Shares, or similar securities to, or solicit offers with
respect thereto from, or enter into any preliminary
conversations or negotiations relating thereto with, any
person, or has taken or will take any action so as to bring
the issuance and sale of any of the Shares under the
registration provisions of the Securities Act and any other
applicable federal and state securities laws. Neither the
Company nor any of its affiliates, nor any person acting on
its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with any
of the Shares.
24. Governmental Approvals. Except as set forth on Schedule 2.1(x)
hereto, and except for the filing of any notice prior or
subsequent to the Closing that may be required under
applicable state or federal securities laws (which if
required, shall be filed on a timely basis), including, but
not limited to, the filing of a registration statement or
statements pursuant to the Registration Rights Agreement, no
authorization, consent, approval, license exemption of, filing
or registration with any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic
or foreign, is or will be necessary for, or in connection
with, the execution or delivery of the Common Shares, or for
the performance by the Company of its obligations under the
Transaction Documents.
25. Employees. Neither the Company nor any subsidiary has any
collective bargaining arrangements or agreements covering any
of its employees, except as set forth on Schedule 2.1(y)
hereto. Except as set forth on Schedule 2.1(y) hereto, neither
the Company nor any subsidiary has any employment contract,
agreement regarding proprietary information, non-competition
agreement, non-solicitation agreement, confidentiality
agreement, or any other similar contract or restrictive
covenant, relating to the right of any officer, employee or
consultant to be employed or engaged by the Company or such
subsidiary. Since September 30, 1999, no officer, consultant
or key employee of the Company or any subsidiary whose
termination, either individually or in the aggregate, could
have a Material Adverse Effect, has terminated or, to the
knowledge of the Company, has any present
intention of terminating his or her employment or engagement
with the Company or any subsidiary.
26. Absence of Certain Developments. Except as provided in
Schedule 2.1(z) hereto, since September 30, 1999, neither the
Company nor any subsidiary has:
(a) issued any stock, bonds or other corporate securities or
any rights, options or warrants with respect thereto;
(b) borrowed any amount or incurred or become subject to any
liabilities (absolute or contingent) except current
liabilities incurred in the ordinary course of business
which are comparable in nature and amount to the current
liabilities incurred in the ordinary course of business
during the comparable portion of its prior fiscal year,
as adjusted to reflect the current nature and volume of
the Company's or such subsidiary's business;
(c) discharged or satisfied any lien or encumbrance or paid
any obligation or liability (absolute or contingent),
other than current liabilities paid in the ordinary
course of business;
(d) declared or made any payment or distribution of cash or
other property to stockholders with respect to its
stock, or purchased or redeemed, or made any agreements
so to purchase or redeem, any shares of its capital
stock;
(e) sold, assigned or transferred any other tangible assets,
or canceled any debts or claims, except in the ordinary
course of business;
(f) sold, assigned or transferred any patent rights,
trademarks, trade names, copyrights, trade secrets or
other intangible assets or intellectual property rights,
or disclosed any proprietary confidential information to
any person except to customers in the ordinary course of
business or to the Purchasers or their representatives;
(g) suffered any substantial losses or waived any rights of
material value, whether or not in the ordinary course of
business, or suffered the loss of any material amount of
prospective business;
(h) made any changes in employee compensation except in the
ordinary course of business and consistent with past
practices;
(i) made capital expenditures or commitments therefor that
aggregate in excess of $100,000;
(j) entered into any other transaction other than in the
ordinary course of business, or entered into any other
material transaction, whether or not in the ordinary
course of business;
(k) made charitable contributions or pledges in excess of
$25,000;
(l) suffered any material damage, destruction or casualty
loss, whether or not covered by insurance;
(m) experienced any material problems with labor or
management in connection with the terms and conditions
of their employment;
(n) effected any two (2) or more events of the foregoing
kind which in the aggregate would be material to the
Company or its subsidiaries; or
(o) entered into an agreement, written or otherwise, to take
any of the foregoing actions.
27. Use of Proceeds. The proceeds from the sale of the Common
Shares and the Warrants will be used by the Company for
working capital and general corporate purposes.
28. Public Utility Holding Company Act and Investment Company Act
Status. The Company is not a "holding company" or a "public
utility company" as such terms are defined in the Public
Utility Holding Company Act of 1935, as amended. The Company
is not, and as a result of and immediately upon any Closing
will not be, an "investment company" or a company "controlled"
by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.
29. ERISA. No liability to the Pension Benefit Guaranty
Corporation has been incurred with respect to any Plan by the
Company or any of its subsidiaries which is or would be
materially adverse to the Company and its subsidiaries. The
execution, delivery and performance of this Agreement and the
other Transaction Documents and the issue and sale of the
Common Shares and the Warrants will not involve any
transaction which is subject to the prohibitions of Section
406 of ERISA or in connection with which a tax could be
imposed pursuant to Section 4975 of the Internal Revenue Code
of 1986, as amended,
provided that, if any of the Purchasers, or any person or
entity that owns a beneficial interest in any of the
Purchasers, is an "employee pension benefit plan" (within the
meaning of Section 3(2) of ERISA) with respect to which the
Company is a "party in interest" (within the meaning of
Section 3(14) of ERISA), the requirements of Sections
407(d)(5) and 408(e) of ERISA, if applicable, are met. As used
in this Section 2.1(ac), the term "Plan" shall mean an
"employee pension benefit plan" (as defined in Section 3 of
ERISA) which is or has been established or maintained, or to
which contributions are or have been made, by the Company or
any subsidiary or by any trade or business, whether or not
incorporated, which, together with the Company or any
subsidiary, is under common control, as described in Section
414(b) or (c) of the Code.
30. Dilutive Effect. The Company understands and acknowledges that
the number of the Warrant Shares issuable upon exercise of the
Warrants will increase in certain circumstances. The Company
further acknowledges that its obligations to issue the Warrant
Shares upon the exercise of the Warrants in accordance with
this Agreement and the Warrants, is, in each case, absolute
and unconditional regardless of the dilutive effect that such
issuance may have on the ownership interest of other
stockholders of the Company.
31. No "Directed Selling Efforts". In connection with the offer
and sale of the Common Shares, the Warrants and the Warrant
Shares, no distributor or any affiliates or any person acting
on behalf of the Company or any affiliate of the Company or
any distributor has engaged in any "directed selling efforts"
(as such term is defined in Rule 902(c) of Regulation S) nor
conducted any general solicitation relating to the offer to
persons residing within the United States or to "U.S. Persons"
(as such term is defined in Rule 902(o) of Regulation S).
VVVV. Representations and Warranties of the Purchasers Each of the
Purchasers hereby makes the following representations and warranties
to the Company with respect solely to itself and not with respect to
any other Purchaser:
1. Organization and Standing of the Purchasers. If the Purchaser
is an entity, such Purchaser is a corporation, limited
liability company or partnership duly incorporated or
organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization,
and such Purchaser was not formed for the specific purpose of
acquiring the Shares.
2. Authorization and Power. The Purchaser has the requisite power
and authority to enter into and perform this Agreement, the
Registration
Rights Agreement and the Escrow Agreement and to purchase the
Common Shares and the Warrants being sold to it hereunder. The
execution, delivery and performance of this Agreement, the
Registration Rights Agreement, the Escrow Agreement and the
documents contemplated hereby by such Purchaser and the
consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate,
limited liability company or partnership action, as applicable
(if the Purchaser is an entity), and no further consent or
authorization of such Purchaser or its Board of Directors,
stockholders, members, managers or partners, as the case may
be, is required. Each of this Agreement, the Registration
Rights Agreement and the Escrow Agreement will have been duly
executed and delivered by the Purchasers on the Closing Date.
Each of this Agreement, the Registration Rights Agreement and
the Escrow Agreement constitutes, or shall constitute when
executed and delivered, a valid and binding obligation of the
Purchaser enforceable against the Purchaser in accordance with
its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, or similar laws relating to, or
affecting generally the enforcement of, creditor's rights,
remedies or by other equitable principles of general
application.
3. No Conflicts. The execution, delivery and performance of this
Agreement, the Registration Rights Agreement, the Escrow
Agreement and the documents contemplated hereby and thereby
and the consummation by such Purchaser of the transactions
contemplated hereby and thereby or relating hereto do not and
will not (i) result in a violation of such Purchaser's charter
documents, bylaws, partnership agreement, operating agreement
or other organizational documents, or (ii) conflict with,
constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or
cancellation of any agreement, indenture or instrument to
which such Purchaser is a party, or result in a violation of
any law, rule, or regulation, or any order, judgment or decree
of any court or governmental agency applicable to such
Purchaser or its properties (except for such conflicts,
defaults and violations as would not, individually or in the
aggregate, have a material adverse effect on such Purchaser).
Such Purchaser is not required to obtain any consent,
authorization or order of, or make any filing or registration
with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this
Agreement, the Registration Rights Agreement, the Escrow
Agreement or the documents contemplated hereby and thereby or
to purchase the Common Shares and the Warrants in accordance
with
the terms hereof, provided that for purposes of the
representation made in this sentence, such Purchaser is
assuming and relying upon the accuracy of the relevant
representations and agreements of the Company herein.
4. Acquisition for Investment. Such Purchaser is purchasing the
Common Shares and the Warrants solely for its own account for
the purpose of investment and not with a view to or for sale
in connection with distribution. Such Purchaser does not have
a present intention to sell the Common Shares or the Warrants,
nor a present arrangement (whether or not legally binding) or
intention to effect any distribution of the Common Shares or
the Warrants to or through any person or entity; provided,
however, that by making the representations herein and subject
to Section 2.2(f) below, such Purchaser does not agree to hold
the Common Shares or the Warrants for any minimum or other
specific term and reserves the right to dispose of the Common
Shares or the Warrants at any time in accordance with federal
securities laws applicable to such disposition. Such Purchaser
acknowledges that it is able to bear the financial risks
associated with an investment in the Common Shares or the
Warrants and that it has been given full access to such
records of the Company and the subsidiaries and to the
officers of the Company and the subsidiaries as it has deemed
necessary or appropriate to conduct its due diligence
investigation.
5. Non-U.S. Person. Such Purchaser is not a "U.S. Person" (as
defined in Rule 902(o) of Regulation S) and is not acquiring
any of the Common Shares, the Warrants or the Warrant Shares
for the account or benefit of any U.S. Person. The documents
effecting the purchase and sale of the Common Shares and the
Warrants has been executed by such Purchaser outside the
"United States" (as defined in Rule 902(p) of Regulation S).
6. Offshore Transaction. The Common Shares and the Warrants were
not offered to such Purchaser in the United States and at the
time of execution of this Agreement and the time of any offer
to such Purchaser to purchase the Common Shares and the
Warrants, such Purchaser was physically outside of the United
States. The offer leading to the sale evidenced hereby was
made in an "offshore transaction" (as defined in Rule 902(h)
of Regulation S).
7. Accredited Purchasers. Such Purchaser is an "accredited
investor" as defined in Regulation D promulgated under the
Securities Act and is a resident of the jurisdiction indicated
on Exhibit A hereto. Purchaser has such knowledge and
experience in financial and
business matters that Purchaser is capable of evaluating the
merits and risks of Purchaser's investment in the Company.
8. Rule 144. Such Purchaser understands that the Shares and
Warrants must be held indefinitely unless such Shares and
Warrants are registered under the Securities Act or an
exemption from registration is available. Such Purchaser
acknowledges that such Purchaser is familiar with Rule 144 of
the rules and regulations of the Commission, as amended,
promulgated pursuant to the Securities Act ("Rule 144"), and
that such Purchaser has been advised that Rule 144 permits
resales only under certain circumstances. Such Purchaser
understands that to the extent that Rule 144 is not available,
such Purchaser will be unable to sell any Shares and the
Warrants without either registration under the Securities Act
or the existence of another exemption from such registration
requirement.
9. Transfer of Shares. Such Purchaser will not sell, offer for
sale, transfer or otherwise convey the Common Shares, the
Warrants or the Warrant Share to a U.S. Person or for the
account or benefit of a U.S. Person unless in accordance with
the provisions of Regulation S, pursuant to registration of
the Common Shares, the Warrants or the Warrant Shares under
the Securities Act or pursuant to an exemption from
registration.
10. No Broker-Dealer Affiliation. None of the Purchasers is a
broker-dealer registered with the Commission or an affiliate
(as such term is defined in Rule 144(a) promulgated under the
Securities Act) of a broker-dealer registered with the
Commission.
11. General. Such Purchaser understands that the Shares are being
offered and sold in reliance on a transactional exemption from
the registration requirement of federal and state securities
laws and the Company is relying upon the truth and accuracy of
the representations, warranties, agreements, acknowledgments
and understandings of such Purchaser set forth herein in order
to determine the applicability of such exemptions and the
suitability of such Purchaser to acquire the Shares. Purchaser
understands that no United States federal or state agency or
any government or governmental agency has passed upon or made
any recommendation or endorsement of the Common Shares and the
Warrants.
12. Opportunities for Additional Information. Such Purchaser
acknowledges that such Purchaser has had the opportunity to
ask questions of and receive answers from, or obtain
additional information from, the executive officers of the
Company concerning the financial and other affairs of the
Company, and to the extent
deemed necessary in light of such Purchaser's personal
knowledge of the Company's affairs, such Purchaser has asked
such questions and received answers to the full satisfaction
of such Purchaser, and such Purchaser desires to invest in the
Company.
13. No General Solicitation. Such Purchaser acknowledges that the
Common Shares and Warrants were not offered to such Purchaser
by means of any form of general or public solicitation or
general advertising, or publicly disseminated advertisements
or sales literature, including (i) any advertisement, article,
notice or other communication published in any newspaper,
magazine, or similar media, or broadcast over television or
radio, or (ii) any seminar or meeting to which such Purchaser
was invited by any of the foregoing means of communications.
14. No Commissions or Similar Fees. In connection with the
purchase of the Common Shares and Warrants by such Purchaser,
such Purchaser has not and will not pay, and has no knowledge
of the payment of, any commission or other direct or indirect
remuneration to any person or entity for soliciting or
otherwise coordinating the purchase of such securities, except
to such persons or entities as are duly licensed and/or
registered to engage in securities offering and selling
activities (or are exempt from such licensing and/or
registration requirements) under applicable federal laws and
the laws of the state(s) in which such activities have taken
place in connection with the transaction contemplated by this
agreement.
15. Reliance by the Company. Purchaser understands fully the
meaning and legal consequences of the provisions herein, and
agrees to indemnify and hold harmless the Company, and each
other person, if any subject to liability because of such
person's connection with the Company, against all actions,
claims, losses, damages and liabilities arising out of or
based upon any false representation or warranty herein, or any
breach by the undersigned of any provision hereof, and to
reimburse the Company and each such other person for any legal
and other expenses incurred by the Company and each such other
person in connection with investigating, defending, and, if
appropriate, settling any action, claim, loss, damage or
liability.
Covenants
The Company covenants with each of the Purchasers, which covenants are for the
benefit of each of the Purchasers and their permitted assignees (as defined
herein) as follows:
WWWW. Securities Compliance.
1. The Company shall notify the Commission in accordance with
their rules and regulations of the transactions contemplated
by any of the Transaction Documents, as may be required, and
shall take all other necessary action and proceedings as may
be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Common
Shares and the Warrant Shares to the Purchasers or subsequent
holders.
2. The Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and
understandings of such Purchasers set forth herein in order to
determine the applicability of federal and state securities
laws exemptions and the suitability of such Purchasers to
acquire the Shares and the Warrants.
XXXX. Registration and Listing. The Company will cause a registration
statement registering the Common Shares and the Warrant Shares to be
filed no later than forty-five (45) days after the Closing Date and
cause the registration statement to be declared effective within (i)
ninety (90) days after the Closing Date or (ii) five (5) business
days of the date on which the Commission informs the Company that it
may request the acceleration of the effectiveness of the
registration statement, whichever date is the earlier (the
"Effectiveness Date"), will comply in all respects with its
reporting and filing obligations under the Exchange Act, will comply
with all requirements related to any registration statement filed
pursuant to this Agreement or the Registration Rights Agreement, and
will not take any action or file any document (whether or not
permitted by the Securities Act or the rules promulgated thereunder)
to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under the Exchange Act or
Securities Act, except as permitted herein. The Company will take
all action necessary to continue the listing or trading of its
Common Stock on the Nasdaq SmallCap Market.
YYYY. Inspection Rights. The Company shall permit, during normal business
hours and upon reasonable request and reasonable notice, each
Purchaser or any employees, agents or representatives thereof, so
long as such Purchaser shall be obligated hereunder to purchase the
Common Shares or shall own Common Shares which, in the aggregate,
represent more than 2% of the total combined voting power of all
voting securities then outstanding, to examine and make reasonable
copies of and extracts from the records and books of account of, and
visit and inspect the properties, assets, operations and business of
the Company and any subsidiary, and to discuss the affairs, finances
and accounts of the Company and any subsidiary with any of its
officers, consultants, directors, and key employees.
ZZZZ. Compliance with Laws. The Company shall comply, and cause each
subsidiary to comply, with all applicable laws, rules, regulations
and orders, noncompliance with which could have a Material Adverse
Effect.
AAAAA. Keeping of Records and Books of Account. The Company shall keep
and cause each subsidiary to keep adequate records and books of
account, in which complete entries will be made in accordance with
GAAP consistently applied, reflecting all financial transactions
of the Company and its subsidiaries, and in which, for each fiscal
year, all proper reserves for depreciation, depletion,
obsolescence, amortization, taxes, bad debts and other purposes in
connection with its business shall be made.
BBBBB. Reporting Requirements The Company shall furnish the following, if
and when applicable, to each Purchaser so long as such Purchaser
shall be obligated hereunder to purchase the Common Shares or
shall own Common Shares which, in the aggregate, represent more
than 2% of the total combined voting power of all voting
securities then outstanding:
1. Reports filed with the Commission on Form 10-QSB, as soon
as available, and in any event within fifteen (15) days
after filing such report with the Commission;
2. Annual Reports filed with the Commission on Form 10-KSB, as
soon as available, and in any event within ninety (90) days
after the end of each fiscal year of the Company; and
3. Copies of all notices and information, including without
limitation notices and proxy statements in connection with
any meetings, that are provided to holders of shares of
Common Stock, contemporaneously with the delivery of such
notices or information to such holders of Common Stock.
CCCCC. Amendments. The Company shall not amend or waive any provision of
the Articles or Bylaws of the Company, or the Registration Rights
Agreement in any way that would adversely affect the liquidation
preferences, dividends rights, conversion rights, voting rights or
redemption rights of the holders of the Common Shares or the
Warrant Shares.
DDDDD. Other Agreements The Company shall not enter into any agreement in
which the terms of such agreement would restrict or impair the
right or ability to perform of the Company or any subsidiary under
any Transaction Document.
EEEEE. Distributions. So long as any Warrants remain outstanding, the
Company agrees that it shall not (i) declare or pay any dividends
or make any distributions to any holder(s) of Common Stock or (ii)
purchase or otherwise acquire for value, directly or indirectly,
any Common Stock or other equity security of the Company.
FFFFF. Intentionally Omitted.
GGGGG. Intentionally Omitted.
HHHHH. Intentionally Omitted.
IIIII. Subsequent Financing. During the ninety (90) day period
immediately following the Effectiveness Date, the Company
covenants and agrees that it will not, without the prior written
consent of the Purchasers, enter into any subsequent offer or sale
to, or exchange with (or other type of distribution to), any third
party (a "Subsequent Financing"), of Common Stock or any
securities convertible or exchangeable into Common Stock,
including debt securities (collectively, the "Financing
Securities"). Notwithstanding the foregoing, a Subsequent
Financing shall not include any transaction involving the
Company's (i) issuance of any Financing Securities (other than for
cash) in connection with a merger and/or acquisition,
consolidation, sale or disposition of all or substantially all of
the Company's assets, (ii) exchange of capital stock for assets,
(iii) public offering at market, or (iv) issuance of Common Stock
or the issuance of options to purchase Common Stock as such is
related to any employee stock ownership plan.
JJJJJ. Reservation of Shares. So long as any of the Common Shares or
Warrants remain outstanding, the Company shall take all action
necessary to at all times have authorized, and reserved for the
purpose of issuance, no less than 100% of the aggregate number of
shares of Common Stock needed to provide for the issuance of the
Common Shares and the Warrant Shares.
KKKKK. Transfer Agent Instructions. The Company shall issue irrevocable
instructions to its transfer agent, and any subsequent transfer
agent, to issue certificates, registered in the name of each
Purchaser or its respective nominee(s), for the Common Shares and
the Warrant Shares in such amounts as specified from time to time
by each Purchaser to the Company upon issuance of the Common
Shares or exercise of the Warrants in the form of Exhibit E
attached hereto (the "Irrevocable Transfer Agent Instructions").
Prior to registration of the Common Shares and the Warrant Shares
under the Securities Act, all such certificates shall bear the
restrictive legend specified in Section 6.1 of this Agreement. The
Company warrants that no instruction other than the Irrevocable
Transfer Agent Instructions referred to in this Section 3.15 will
be given by the Company to its transfer agent and that the Shares
shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement and
the Registration Rights Agreement. Nothing in this Section 3.15
shall affect in any way each Purchaser's obligations and
agreements set forth in Section 6.1 to comply with all applicable
prospectus delivery requirements, if any, upon resale of the
Shares. If a Purchaser provides the Company with an opinion of
counsel, in a generally acceptable form, to the effect that a
public sale, assignment or transfer of the Shares may be made
without registration under the Securities Act or the Purchaser
provides the Company with reasonable assurances that the Shares
can be sold pursuant to Rule 144 without any restriction as to the
number of securities acquired as of a particular date that can
then be immediately sold, the Company shall permit the transfer,
and, in the case of the Common Shares and the Warrant Shares,
promptly instruct its transfer agent to issue one (1) or more
certificates in such name and in such denominations as specified
by such
Purchaser and without any restrictive legend. The Company
acknowledges that a breach by it of its obligations under this
Section 3.15 will cause irreparable harm to the Purchasers by
vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at
law for a breach of its obligations under this Section 3.15 will
be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Section 3.15, that
the Purchasers shall be entitled, in addition to all other
available remedies, to an order and/or injunction restraining any
breach and requiring immediate issuance and transfer, without the
necessity of showing economic loss and without any bond or other
security being required.
Conditions
LLLLL. Conditions Precedent to the Obligation of the Company to Sell the
Shares at Closing. The obligation hereunder of the Company to
issue and sell the Common Shares and Warrants to the Purchasers at
the Closing is subject to the satisfaction or waiver, at or before
the Closing, of each of the conditions set forth below. These
conditions are for the Company's sole benefit and may be waived by
the Company at any time in its sole discretion.
1. Accuracy of Each Purchaser's Representations and
Warranties. The representations and warranties of each
Purchaser shall be true and correct in all material
respects as of the date when made and as of the Closing
Date as though made at that time, except for
representations and warranties that are expressly made as
of a particular date, which shall be true and correct in
all material respects as of such date.
2. Performance by the Purchasers. Each Purchaser shall have
performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with
by such Purchaser at or prior to the Closing, including
having paid by wire transfer of funds into escrow in
accordance with this Agreement and the Escrow Agreement the
Purchase Price set forth opposite such Purchaser's name on
Exhibit A under the heading "Purchase Prices"; such
Purchaser shall have executed and delivered this Agreement,
the Registration Rights Agreement and the Escrow Agreement
to the Escrow Agent on behalf of the Company. The Escrow
Agent shall have performed, satisfied and complied in all
material respects with all covenants, agreements and
conditions required by this Agreement and the Escrow
Agreement to be performed, satisfied or complied with by
the Escrow Agent at or prior to the Closing, including
delivery of all of the Purchaser's Closing Documents to the
Company.
3. No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions
contemplated by this Agreement.
MMMMM. Conditions Precedent to the Obligation of the Purchasers to
Purchase the Shares at the Closing. The obligation hereunder of
each Purchaser to acquire and pay for the applicable Common Shares
and Warrants at the Closing is subject to the satisfaction or
waiver, at or before the Closing, of each of the conditions set
forth below. These conditions are for each Purchaser's sole
benefit and may be waived by such Purchaser at any time in its
sole discretion.
1. Accuracy of the Company's Representations and Warranties.
Each of the representations and warranties of the Company
shall be true and correct in all material respects as of
the date when made and as of the Closing Date as though
made at that time (except for representations and
warranties that speak as of a particular date), which shall
be true and correct in all material respects as of such
date.
2. Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects
with all covenants,
agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Company at or
prior to the Closing.
3. No Suspension, Etc. From the date hereof to the Closing
Date, trading in the Company's Common Stock shall not have
been suspended by the Commission, and, at any time prior to
the Closing Date, trading in securities generally as
reported by Bloomberg Financial Markets ("Bloomberg") shall
not have been suspended or limited, or minimum prices shall
not have been established on securities whose trades are
reported by Bloomberg, or on the New York Stock Exchange,
nor shall a banking moratorium have been declared either by
the United States, or New York State authorities, nor shall
there have occurred any material outbreak or escalation of
hostilities or other national or international calamity or
crisis of such magnitude in its effect on, or any material
adverse change in any financial market which, in each case,
in the judgment of such Purchaser, makes it impracticable
or inadvisable to purchase the Common Shares.
4. No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions
contemplated by this Agreement.
5. No Proceedings or Litigation. No action, suit or proceeding
before any arbitrator or any governmental authority shall
have been commenced, and no investigation by any
governmental authority shall have been threatened, against
the Company, or any of the officers, directors or
affiliates of the Company seeking to restrain, prevent or
change the transactions contemplated by this Agreement, or
seeking damages in connection with such transactions.
6. Opinion of Counsel, Etc. At the Closing, the Purchasers
shall have received an opinion of counsel to the Company,
dated the date of such Closing, in the form of Exhibit F
hereto, and the such other certificates and documents as
the Purchaser or its counsel shall reasonably require
incident to the Closing.
7. Registration Rights Agreement. Prior to the Closing, the
Company shall have executed and delivered the Registration
Rights Agreement to the Escrow Agent on behalf of each
Purchaser.
8. Stock and Warrant Certificates. The Company shall have
executed and delivered to the Escrow Agent on behalf of
each Purchaser, the
certificates (in such denominations as such Purchaser shall
request) for the Common Shares and the Warrants being
purchased by such Purchaser at the Closing.
9. Resolutions. Prior to the Closing, the Board of Directors
of the Company shall have adopted resolutions consistent
with Section 2.1(b) above in a form reasonably acceptable
to each Purchaser (the "Resolutions").
10. Reservation of Shares. As of the Closing Date, the Company
shall have reserved out of its authorized and unissued
Common Stock, solely for the purpose of effecting the
issuance of the Common Shares and the exercise of the
Warrants, a number of shares of Common Stock equal to at
least 100% of the shares of Common Stock which would be
issuable upon issuance of the Common Shares and upon
exercise of the Warrants following the Closing (after
giving effect to the Common Shares and Warrants to be
issued on the Closing Date and assuming all such Common
Shares and Warrants were fully issuable and exercisable, as
applicable, on such date regardless of any limitation on
the timing or amount of such issuances or exercises).
11. Transfer Agent Instructions. As of the Closing Date, the
Irrevocable Transfer Agent Instructions, in the form of
Exhibit E attached hereto, shall have been delivered to and
acknowledged in writing by the Company's transfer agent.
12. Secretary's Certificate. At the Closing, the Company shall
have delivered to the Escrow Agent on behalf of each
Purchaser a secretary's certificate, dated as of such
Closing Date, as to (i) the Resolutions, (ii) the Articles
and (iii) the Bylaws, each as in effect at the Closing, and
(iv) the authority and incumbency of the officers of the
Company executing the Transaction Documents and any other
documents required to be executed or delivered in
connection therewith.
13. Escrow Agreement. Prior to the Closing, the Company shall
have executed and delivered the Escrow Agreement to the
Escrow Agent on behalf of each Purchaser.
14. Officer's Certificate. At the Closing, the Company shall
have delivered to such Purchaser a certificate of an
executive officer of the Company, dated as of the Closing
Date, confirming the accuracy of the Company's
representations, warranties and covenants as of the Closing
Date and confirming the compliance by the Company with the
conditions precedent set forth in this Section 4.2 as of
the Closing Date.
Registration Rights
At the Closing, the Company and each of the Purchasers shall enter into a
Registration Rights Agreement in the form attached hereto as Exhibit D (the
"Registration Rights Agreement").
Stock Certificate Legend
NNNNN. Legend. Each certificate representing the Common Shares, the
Warrants, and the securities issued upon exercise thereof, as
applicable and appropriate, shall be stamped or otherwise
imprinted with a legend in substantially the following form (in
addition to any legend required by applicable federal, provincial
or state securities or "blue sky" laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED OR OTHERWISE DISPOSED OF
UNLESS IN ACCORDANCE WITH REGULATION S OF THE ACT, REGISTERED UNDER THE
ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR VIRTUAL COMMUNITIES,
INC. (THE "COMPANY") SHALL HAVE RECEIVED AN OPINION IN FORM, SCOPE AND
SUBSTANCE REASONABLY ACCEPTABLE TO THE COMPANY, OF COUNSEL, WHO IS
REASONABLY ACCEPTABLE TO THE COMPANY THAT REGISTRATION OF SUCH SECURITIES
UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE FEDERAL
AND STATE SECURITIES LAWS IS NOT REQUIRED.
The Company agrees to reissue certificates representing the Shares or the
Warrants, without the legend set forth above if at such time, prior to making
any transfer of any Shares or the Warrants such holder thereof shall give
written notice to the Company describing the manner and terms of such transfer
and removal as the Company may reasonably request and such holder otherwise
complies with the terms of the Transaction Documents. The legend set forth above
shall be removed and the Company shall issue a certificate without such legend
to the holder of any Shares or Warrants upon which it is stamped if, unless
otherwise required by federal or state securities laws, (a) the sale of such
Shares or Warrants is registered under the Securities Act (including
registration pursuant to Rule 416 thereunder) as contemplated by the
Registration Rights Agreement (b) such holder provides the Company with an
opinion of counsel, in form, substance and scope customary for opinions of
counsel in comparable transactions, to the effect that a sale or transfer of
such Shares or Warrants may be made without registration under the Securities
Act; or (c) such holder provides the Company with reasonable assurances that
such Shares or Warrants can be sold under Rule 144(k). Each Purchaser agrees
that it will only sell Shares or Warrants, including those represented by a
certificate(s) from which the legend has been removed, pursuant to an effective
registration statement, under an exemption from the registration requirements of
the Securities Act or in accordance with Rule 144(k). In
the event the above legend is removed from any Shares or Warrants and the
effectiveness of a registration statement covering such Shares or Warrants is
suspended or the Company determines that a supplement or amendment thereto is
required by applicable securities laws, then upon reasonable advance notice to
such Purchaser the Company may require that the above legend be placed on any
such Shares or Warrants that cannot then be sold pursuant to an effective
registration statement, under an exemption from the registration requirements of
the Securities Act or under Rule 144(k) and such Purchaser shall cooperate in
the replacement of such legend. Such legend shall thereafter be removed when
such Shares or Warrants may again be sold pursuant to an effective registration
statement, under an exemption from the registration requirements of the
Securities Act or under Rule 144(k). The restrictions on transfer contained in
Section 6.1 shall be in addition to, and not by way of limitation of, any other
restrictions on transfer contained in any other section of this Agreement.
Termination
OOOOO. Termination by Mutual Consent. This Agreement may be terminated at
any time prior to any Closing by the mutual written consent of the
Company and the Purchasers.
PPPPP. Other Termination. This Agreement may be terminated by the action
of the Board of Directors of the Company or by any one or more of
the Purchasers at any time if the Closing shall not have been
consummated by the Closing Date, as long as the failure to so
consummate is not the fault of the terminating party.
QQQQQ. Termination of Closing. If the Closing has not occurred on or
prior to the Closing Date, those sections and provisions relating
to the Closing in this Agreement may be terminated by the action
of the Board of Directors of the Company or by any one or more of
the Purchasers as long as the failure to consummate the Closing is
not the fault of the terminating party.
RRRRR. Effect of Termination. In the event of termination by the Company
or any one or more of the Purchasers of this Agreement or any part
hereof, written notice thereof shall forthwith be given to the
other party and the transactions contemplated by this Agreement
and the Registration Rights Agreement shall be terminated without
further action by either party. If this Agreement is terminated as
provided in Section 7.1 or 7.2 herein, this Agreement shall become
void and of no further force and effect, except for Sections 9.1
and 9.2, and Article VIII herein. Nothing in this Section 7.4
shall be deemed to release the Company or any Purchaser from any
liability for any breach under this Agreement or the Registration
Rights Agreement, or to impair the rights of the Company and the
Purchasers to compel specific performance by the other party of
its obligations under this Agreement and the Registration Rights
Agreement.
Indemnification
SSSSS. General Indemnity. The Company agrees to indemnify and hold
harmless the Purchasers (and their respective directors, officers,
affiliates, agents, successors and assigns) from and against any
and all losses, liabilities, deficiencies, costs, damages and
expenses (including, without limitation, reasonable attorney's
fees, charges and disbursements) incurred by the Purchasers as a
result of any inaccuracy in or breach of the representations,
warranties or covenants made by the Company herein. Each Purchaser
severally but not jointly agrees to indemnify and hold harmless
the Company and its directors, officers, affiliates, agents,
successors and assigns from and against any and all losses,
liabilities, deficiencies, costs, damages and expenses (including,
without limitation, reasonable attorneys fees, charges and
disbursements) incurred by the Company as result of any inaccuracy
in or breach of the representations, warranties or covenants made
by such Purchaser herein.
TTTTT. Indemnification Procedure. Any party entitled to indemnification
under this Article VIII (an "indemnified party") will give written
notice to the indemnifying party of any matters giving rise to a
claim for indemnification; provided, that the failure of any party
entitled to indemnification hereunder to give notice as provided
herein shall not relieve the indemnifying party of its obligations
under this Article VIII except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. In
case any action, proceeding or claim is brought against an
indemnified party in respect of which indemnification is sought
hereunder, the indemnifying party shall be entitled to participate
in and, unless in the reasonable judgment of the indemnified party
a conflict of interest between it and the indemnifying party may
exist with respect of such action, proceeding or claim, to assume
the defense thereof with counsel reasonably satisfactory to the
indemnified party. In the event that the indemnifying party
advises an indemnified party that it will contest such a claim for
indemnification hereunder, or fails, within thirty (30) days of
receipt of any indemnification notice to notify, in writing, such
person of its election to defend, settle or compromise, at its
sole cost and expense, any action, proceeding or claim (or
discontinues its defense at any time after it commences such
defense), then the indemnified party may, at its option, defend,
settle or otherwise compromise or pay such action or claim. In any
event, unless and until the indemnifying party elects in writing
to assume and does so assume the defense of any such claim,
proceeding or action, the indemnified party's costs and expenses
arising out of the defense, settlement or compromise of any such
action, claim or proceeding shall be losses subject to
indemnification hereunder. The indemnified party shall cooperate
fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the
indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the indemnified party which
relates to such action or claim. The indemnifying party shall keep
the indemnified party fully apprised at all times as to the status
of the defense or any settlement negotiations with respect
thereto. If the indemnifying party elects to defend any
such action or claim, then the indemnified party shall be entitled
to participate in such defense with counsel of its choice at its
sole cost and expense. The indemnifying party shall not be liable
for any settlement of any action, claim or proceeding effected
without its prior written consent. Notwithstanding anything in
this Article VIII to the contrary, the indemnifying party shall
not, without the indemnified party's prior written consent, settle
or compromise any claim or consent to entry of any judgment in
respect thereof which imposes any future obligation on the
indemnified party or which does not include, as an unconditional
term thereof, the giving by the claimant or the plaintiff to the
indemnified party of a release from all liability in respect of
such claim. The indemnification required by this Article VIII
shall be made by periodic payments of the amount thereof during
the course of investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred, so
long as the indemnified party irrevocably agrees to refund such
moneys if it is ultimately determined by a court of competent
jurisdiction that such party was not entitled to indemnification.
The indemnity agreements contained herein shall be in addition to
(a) any cause of action or similar rights of the indemnified party
against the indemnifying party or others, and (b) any liabilities
the indemnifying party may be subject to pursuant to the law.
Miscellaneous
UUUUU. Fees and Expenses. Each party shall pay the fees and expenses of
its advisors, counsel, accountants and other experts, if any, and
all other expenses, incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of
this Agreement, provided that the Company shall pay $35,000, at
the Closing, from the aggregate Purchase Prices, to pay for all
attorneys fees and expenses (exclusive of disbursements and
out-of-pocket expenses) incurred by the Purchasers in connection
with the preparation, negotiation, execution and delivery of this
Agreement, the other Transaction Documents and the consummation of
the transactions contemplated hereunder and thereunder. In
addition, the Company shall pay all reasonable fees and expenses
incurred by the Purchasers in connection with any amendments,
modifications or waivers of this Agreement or any of the other
Transaction Documents, or incurred in connection with the
enforcement of this Agreement or any of the other Transaction
Documents, including, without limitation, all reasonable attorneys
fees and expenses. The Company shall pay all stamp or other
similar taxes and duties levied in connection with issuance of the
Shares pursuant hereto.
VVVVV. Specific Enforcement, Consent to Jurisdiction.
1. The remedies provided in this Agreement and the
Registration Rights Agreement shall be cumulative and in
addition to all other remedies available under this
Agreement and the Registration Rights Agreement, at law or
in equity (including a decree of specific
performance and/or other injunctive relief), no remedy
contained herein shall be deemed a waiver of compliance
with the provisions giving rise to such remedy and nothing
herein shall limit a Purchaser's right to pursue actual
damages for any failure by the Company to comply with the
terms of this Agreement or the Registration Rights
Agreement. Amounts set forth or provided for herein and
therein with respect to payments, conversion and the like
(and the computation thereof) shall be the amounts to be
received by the Purchasers thereof and shall not, except as
expressly provided herein, be subject to any other
obligation of the Company (or the performance thereof). The
Company acknowledges that a breach by it of its obligations
hereunder and thereunder will cause irreparable harm to the
holders of the Common Shares and Warrants that the remedy
at law for any such breach may be inadequate. The Company
therefore agrees that, in the event of any such breach or
threatened breach, the holders of the Common Shares and
Warrants shall be entitled, in addition to all other
available remedies, to an injunction restraining any
breach, without the necessity of showing economic loss and
without any bond or other security being required.
2. Each of the Company and the Purchasers (i) hereby
irrevocably submits to the jurisdiction of the United
States District Court sitting in the Southern District of
New York and the courts of the State of New York located in
New York county for the purposes of any suit, action or
proceeding arising out of or relating to this Agreement or
any of the other Transaction Documents or the transactions
contemplated hereunder or thereunder and (ii) hereby
waives, and agrees not to assert in any such suit, action
or proceeding, any claim that it is not personally subject
to the jurisdiction of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the
venue of the suit, action or proceeding is improper. Each
of the Company and the Purchasers consents to process being
served in any such suit, action or proceeding by mailing a
copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of
process and notice thereof. Nothing in this Section 9.2
shall affect or limit any right to serve process in any
other manner permitted by law.
WWWWW. Entire Agreement; Amendment. This Agreement contains the entire
understanding and agreement of the parties with respect to the
matters covered hereby and, except as specifically set forth
herein or in the Transaction Documents, neither the Company nor
any of the Purchasers makes any representations, warranty,
covenant or undertaking with respect to such matters, and they
supersede all prior understandings and agreements with respect to
said subject matter, all of which are merged herein. No provision
of this Agreement may be waived or amended other than by a written
instrument signed by the
Company and the Purchasers of at least two-thirds (2/3) of the
Common Shares then outstanding, and no provision hereof may be
waived other than by a written instrument signed by the party
against whom enforcement of any such amendment or waiver is
sought. No such amendment shall be effective to the extent that it
applies to less than all of the holders of the Common Shares then
outstanding. No consideration shall be offered or paid to any
person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same
consideration is also offered to all of the parties to the
Transaction Documents or holders of Common Shares, as the case may
be.
XXXXX. Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be
in writing and shall be effective (a) upon hand delivery by telex
(with correct answer back received), telecopy or facsimile at the
address or number designated below (if delivered on a business day
during normal business hours where such notice is to be received),
or the first business day following such delivery (if delivered
other than on a business day during normal business hours where
such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur. The addresses for such
communications shall be:
If to the Company: Virtual Communities, Inc.
▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: Avi ▇▇▇▇▇▇▇▇▇
Tel.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
Wuersch & ▇▇▇▇▇▇ LLP
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▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to any Purchaser:
At the address of such Purchaser as set forth on
Exhibit A to this Agreement, with copies as
specified in writing by such Purchaser and with copies
to:
with copies to:
▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP
The Chrysler Building
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Attn: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Tel.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Any party hereto may from time to time change its address for notices by giving
at least ten (10) days written notice of such changed address to the other party
hereto.
YYYYY. Waivers. No waiver by either party of any default with respect to
any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any
other provisions, condition or requirement hereof, nor shall any
delay or omission of any party to exercise any right hereunder in
any manner impair the exercise of any such right accruing to it
thereafter.
ZZZZZ. Headings. The article, section and subsection headings in this
Agreement are for convenience only and shall not constitute a part
of this Agreement for any other purpose and shall not be deemed to
limit or affect any of the provisions hereof.
AAAAAA. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and
assigns. After each Closing, the assignment by a party to this
Agreement of any rights hereunder shall not affect the
obligations of such party under this Agreement.
BBBBBB. No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted
successors and assigns and is not for the benefit of, nor may
any provision hereof be enforced by, any other person.
CCCCCC. Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York,
without giving effect to the choice of law provisions. This
Agreement shall not be interpreted or construed with any
presumption against the party causing this Agreement to be
drafted.
DDDDDD. Survival. The representations and warranties of the Company and
the Purchasers contained in: (i) Sections 2.1(o) and (s) shall
survive indefinitely and (ii)those contained in Article II, with
the exception of Sections 2.1(o) and (s), shall survive the
execution and delivery hereof and the applicable Closing until
the date three (3) years from the Closing Date; and (iii) the
agreements and covenants set forth in Articles I, III, V, VII,
VIII and IX of this Agreement shall survive the execution and
delivery hereof and any Closing hereunder, as applicable, until
the Purchasers in the aggregate beneficially own (determined in
accordance with Rule 13d-3 under the Exchange Act) less than 2%
of the total combined voting power of all voting securities then
outstanding, provided, that Sections 3.1, 3.2, 3.4, 3.7, 3.8,
3.9, 3.10 and 3.12 shall not expire until the Registration
Statement required by Section 2 of the Registration Rights
Agreement is no longer required to be effective under the terms
and conditions of Registration Rights Agreement.
EEEEEE. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one
and the same instrument and shall become effective when
counterparts have been signed by each party and delivered to the
other parties hereto, it being understood that all parties need
not sign the same counterpart. In the event any signature is
delivered by facsimile transmission, the party using such means
of delivery shall cause four (4) additional executed signature
pages to be physically delivered to the other parties within
five (5) days of the execution and delivery hereof.
FFFFFF. Publicity. The Company agrees that it will not disclose, and
will not include in any public announcement, the name of the
Purchasers, unless and until such disclosure is required by law
or applicable regulation, and then only to the extent of such
requirement. In addition to the foregoing, any disclosure of the
name of the Purchasers shall be subject to review and comment by
the Purchasers prior to disclosure.
GGGGGG. Severability. The provisions of this Agreement and the
Registration Rights Agreement are severable and, in the event
that any court of competent jurisdiction shall determine that
any one or more of the provisions or part of the provisions
contained in this Agreement or the Registration Rights Agreement
shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of
a provision of this Agreement or the Registration Rights
Agreement shall be reformed and construed as if such invalid or
illegal or unenforceable provision, or part of such provision,
had never been contained herein, so that such provisions would
be valid, legal and enforceable to the maximum extent possible.
HHHHHH. Further Assurances. From and after the date of this Agreement,
upon the request of any Purchaser or the Company, each of the
Company and the Purchasers shall execute and deliver such
instruments, documents and other writings as may be reasonably
necessary or desirable to confirm and carry out and to
effectuate fully the intent and purposes of this Agreement, the
Common Shares, the Warrants, the Warrant Shares, and the
Registration Rights Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorize officer as of the date first above
written.
VIRTUAL COMMUNITIES, INC.
By:
--------------------------------
Name:
Title:
MAGELLAN INTERNATIONAL, LTD.
By:
--------------------------------
Name:
Title:
ASPEN INTERNATIONAL, LTD.
By:
--------------------------------
Name:
Title:
ACQUA WELLINGTON VALUE FUND, LTD.
By:
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇
Title:
THE CUTTYHUNK FUND LIMITED
By:
---------------------------------
Name:
Title:
EXHIBIT A to the
COMMON STOCK AND WARRANTS PURCHASE AGREEMENT
VIRTUAL COMMUNITIES, INC.
Number of Common Shares
List of Purchasers and Warrants Purchase Price
------------------ ----------------------- --------------
Magellan International, Ltd. Common Shares: 86,300 $500,000
Charlotte House Warrants:
Charlotte Street A: 21,575
Nassau, Bahamas B: 63,333
Tel. no.: ▇▇▇-▇▇▇-▇▇▇▇
Fax no.: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇
Aspen International, Ltd. Common Shares: 86,300 $500,000
Charlotte House Warrants:
Charlotte Street A: 21,575:
Nassau, Bahamas B: 63,333
Tel. no.: ▇▇▇-▇▇▇-▇▇▇▇
Fax no.: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇
Acqua Wellington Value Fund Ltd. Common Shares: 86,300 $500,000
c/o MeesPierson Fund Services Warrants:
(Bahamas) Limited A: 21,575
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Centre B: 63,333
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Tel. no.: ▇▇▇-▇▇▇-▇▇▇▇
Fax no.: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇
The Cuttyhunk Fund Limited Common Shares: 258,900 $1,500,000
c/o Optima Fund Management Warrants:
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇ A: 64,725
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ B: 250,000
Tel. no.: ▇▇▇-▇▇▇-▇▇▇▇
Fax no.: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇